For educational institutions across the globe, the rest of the 2020 spring semester will mean a deserted campus. There will be no classrooms bustling with students, there will be no packed arenas or fields for sporting events and there will be no walk across the stage for graduating seniors. The COVID-19 global health crisis has changed seemingly every part of everyday life, and its effects on schools and educational institutions across the globe are tremendous.
With the spring semester transitioned into a virtual learning environment for most, the financial implications for schools due to the return of room and board as well as the effect on admissions will be significant.
The Return of Room & Board
One of the biggest financial impacts facing most institutions is the refund of student housing and dining costs. For a number of institutions, the collection of auxiliary fees like room and board are a significant source of income. According to an article from Inside Higher Ed, a private liberal arts college in Massachusetts collected $40.4 million in residence and dining fees, about 16.5 percent of its total operating revenue in 2018.
Losses like this don’t just have drastic effects on a school’s bottom line, they can also have an effect on a school’s credit rating. With insurance payouts for the return of room and board not likely, a number of schools with already low liquidity levels will be forced to borrow money. This will result in a negative effect on its credit rating, which could mean years of financial hardship on an institution.
While the spring semester is already heavily effected, admissions also faces hardship. In a letter to US House Speaker Nancy Pelosi, the American Council on Education predicted college admissions would be down 15% for the next academic year. This includes a 25% downturn in the enrollment of international students who often pay full tuition, which helps schools meet their budgets and afford financial aid for American students.
One of the biggest factors into this admissions downturn is simply timing. As most Americans wait in quarantine, the result is the cancellation of SAT and ACT tests for high school juniors hoping to apply to colleges. College Board, the administrator of the SAT, is currently preparing for an at-home style solution for students who are currently missing out on taking these tests. While a solution may come, some schools are waiving the SAT and ACT entirely. This last minute change will create a new standard for admissions many will need to adapt to on the fly.
Higher education institutions aren’t alone in feeling the effects from COVID-19, many private k-12 schools are also concerned over a potential drop in enrollment. On a national scale, many schools are finding their re-enrollment rate of current students to be alarmingly low as a result of COVID-19. Social interactions, teachers, clubs and sports teams are all huge selling points in regards to the price tag. With the move to a remote learning environment, that value is more difficult to prove.
Private education prior to the COVID-19 pandemic was already experiencing a downturn of enrollment. According to the National Catholic Educational Association (NCEA), Catholic schools have seen an 18 percent decrease in student enrollment and a 12.8 percent decrease in the number of schools in the past decade. According to an article based in Central New Jersey, tuition for Catholic high schools can range anywhere from $14,400 a year to $23,600. As unemployment due to COVID-19 grows, it will certainly impact how families approach financial decisions regarding education.
As schools begin to prepare for this financial impact, it is important to sell the value of private education to prospective students and their families. A recent article from ISM highlights three key elements private schools should remember when pitching their institution.
- Define the Educational Experience You Offer.
- Illustrate the Student Experience.
- Continually Communicate Your School’s Value.
The COVID-19 global health crisis will affect all aspects of our lives for the foreseeable future, and it will be an issue the education sector will be monitoring. With some institutions reporting losses up to $100 million for the spring semester and the fate of the fall semester uncertain, it is now more important than ever to weigh financial options.
Please reach out to your trusted RCM&D advisor today if you have any questions regarding your institution’s plan. We are here to help guide you through these uncertain times.